Direct Loan Training Suite – Programmatic Primer Direct Loan Programmatic Primer Virginia Hagins Pam Moran Sarah Utz Session #2

Direct Loan Training Suite – Programmatic Primer Agenda OverviewDL ProcessServicingAdditional Resources 2

Direct Loan Training Suite – Programmatic Primer 3 What a Difference a Year Makes Number of Loans

Direct Loan Training Suite – Programmatic Primer DIRECT LOAN – FFEL PROGRAM STATISTICS (To Be Added) DLFFELDLFFELDLFFEL Schools1,2244,6211,7354,424 1,880 3,848 Loans3,317,00013,388,0345,412,76615,229,602 5,513,1827,911,666 Dollars$13.1 B$55.5 B$20.9 B$61.1 B $ 12.4B$17.9B

Direct Loan Training Suite – Programmatic Primer ECASLA LOAN PURCHASE STATISTICS* 5 TOTAL FFEL LOANS MADE FFEL LOANS SOLD TO ED PERCENT SOLD TO ED Loans15,229,60211,591, % Dollars$61,160,183,858$46,252,966, % *Does not include Consolidation Loans

Direct Loan Training Suite – Programmatic Primer ED OWNED LOANS 6 ALL LOANS MADE DIRECT LOAN FFEL PURCHASED BY ED TOTAL LOANS OWNED BY ED % OWNED BY ED Loans20,642,3685,412,76611,591,58817,004, % Dollars$82.1 Billion$20. 9 Billion$46. 3 Billion$67.2 Billion81.8 %

Direct Loan Training Suite – Programmatic Primer William D. Ford Federal Direct Loan Program 7

Direct Loan Training Suite – Programmatic Primer Roles and Responsibilities SchoolsSchools –Certify eligibility –Educate borrowers about their responsibilities –Send/receive financial and student data to/from Federal Student Aid –Deliver proceeds –Funds management and reconciliation 8

Direct Loan Training Suite – Programmatic Primer Roles and Responsibilities Federal Student Aid provides operational, system, and service support to schools –School Eligibility –Funding –Reconciliation/Closeout –Communications/Publications 9

Direct Loan Training Suite – Programmatic Primer Roles and Responsibilities Federal Student Aid also provides operational, system, and service support to borrowers –Loan Servicing –Software/Web-based services –Customer Service 10

Direct Loan Training Suite – Programmatic Primer Annual Loan Limits Year Dependent Undergraduate Independent Undergraduate And Dep. Undergrad whose parent can’t borrow PLUS Graduate/ Professional Student 1 st $5,500 (maximum $3,500 subsidized) $9,500 (maximum $3,500 subsidized) Up to $20,500 each academic year (maximum $8,500 subsidized) 2 nd $6,500 (maximum $4,500 subsidized) $10,500 (maximum $4,500 subsidized) 3 rd and Beyond $7,500 (maximum $5,500 subsidized) $12,500 (maximum $5,500 subsidized) 11

Direct Loan Training Suite – Programmatic Primer Interest Rates 12 Direct Subsidized Loans for Undergraduate Borrowers 1 st Disbursed On or After And BeforeInterest Rate July 1, 2009July 1, % July 1, 2010July 1, % July 1, 2011July 1, % All Other Direct Subsidized and Unsubsidized Loans 6.8% Direct PLUS for Parents and Grad/Professional Students 7.9% Direct Consolidation Weighted Average 8.25% Cap

Direct Loan Training Suite – Programmatic Primer Fees and Interest Rebate 13 Direct Subsidized and Unsubsidized Loans First Disbursed On or After Origination Fee Up-front Interest Rebate July 1, 2009 and before July 1, %1.0% July 1, 2010 and beyond 1.0%0.5% PLUS fees remain at 4.0% with an upfront interest rebate of 1.5%

Direct Loan Training Suite – Programmatic Primer Benefits Grace period Forbearance Deferment Public Service forgives remaining balance on certain loans after 120 on- time payments No Accrual of Interest Benefit for Active Duty Service Members (up to 60 months) for DL borrowers serving in an area of hostilities 14

Direct Loan Training Suite – Programmatic Primer Repayment Options Standard Repayment Extended Fixed/Extended Graduated Repayment Graduated Repayment Plan Income-Contingent Repayment (ICR) Income-Based Repayment (IBR) 15

Direct Loan Training Suite – Programmatic Primer ISIR COD Processing Funding Data and Payment Requests Central Processing System (CPS) FAFSA SAR COD Originations, Disbursements & Paper MPNs Responses GAPS NSLDS Servicers e-MPN Funding Request Money Loans and Disbursements Enrollment Status Electronic Counseling Repayment/ Servicing Student Data 16

Direct Loan Training Suite – Programmatic Primer Common Origination and Disbursement (COD) System COD is a student-centric –Pell, ACG, SMART, TEACH, DL School sends information to COD COD processes/edits and returns response 17

Direct Loan Training Suite – Programmatic Primer Submitting Records to COD Batch –Via SAIG mailbox –Picked up by periodic “sweeps” –Typically transmits many student records Online at COD website –Transactions almost “real time” –Involves one student record at a time 18

Direct Loan Training Suite – Programmatic Primer OriginateDisburse Servicing Promissory Note Direct Loan Processing Cycle 19

Direct Loan Training Suite – Programmatic Primer Loan Origination Direct Loan Originates and FFEL Certifies –Loan Origination Record (LOR) contains Person data + DL Award + Disbursement data (amounts and dates) –Anticipated or actual disbursements must equal the award amount COD response –Indicates if records were accepted or rejected Edit codes tell what is wrong –Provides status and expiration date of the MPN 20

Direct Loan Training Suite – Programmatic Primer PLUS Loan Credit Check COD Completes upon receipt of origination –PLUS MPN includes authorization Online Credit check, with signed authorization 21

Direct Loan Training Suite – Programmatic Primer PLUS Credit Check No Adverse Credit Adverse Credit options –Stop PLUS process –Obtain an endorser –Appeal to COD due to extenuating circumstances 22

Direct Loan Training Suite – Programmatic Primer PLUS Loan Endorser COD mails “endorser addendum” with denial packet Borrower locates someone willing to endorse the loan Endorser completes and signs addendum Borrower returns addendum to MPN processor Credit check for endorser 23

Direct Loan Training Suite – Programmatic Primer New March

Direct Loan Training Suite – Programmatic Primer OriginateDisburse Servicing Promissory Note Direct Loan Processing Cycle 25

Direct Loan Training Suite – Programmatic Primer School Options for MPN Multi-year vs. Single-year Electronic vs. Paper COD Print vs. School Print (with paper) 26

Direct Loan Training Suite – Programmatic Primer eMPN Benefits School options eMPN simulations 27

Direct Loan Training Suite – Programmatic Primer New March

Direct Loan Training Suite – Programmatic Primer Paper MPN Printing options Submitting paper MPNs to MPN processor –Direct from student –Via school Manifest Sub/Unsub batched separately from PLUS 29

Direct Loan Training Suite – Programmatic Primer MPN Responses Linked MPNs Pending MPNs— “X” –If no award for the student in COD New response for each status and expiration date change 30

Direct Loan Training Suite – Programmatic Primer Linking MPNs to Loans New loan awards linked to active MPNs If more than one MPN is active, COD links to one with greatest expiration date 31

Direct Loan Training Suite – Programmatic Primer Entrance & Exit Counseling Through March online counseling at the Direct Loan Servicing Web Site Entrance Counseling materials available ⁻ Brochures ⁻ Entrance Counseling Guide ⁻ Direct Loan Videos Entrance & Exit Counseling reports available 32

Direct Loan Training Suite – Programmatic Primer New March

Direct Loan Training Suite – Programmatic Primer OriginateDisburse Servicing Promissory Note Direct Loan Processing Cycle 34

Direct Loan Training Suite – Programmatic Primer Disbursements MPN in place before disbursing Disbursements for loans without an accepted MPN will reject Report Disbursements within 30 days –Actual disbursement date –Disbursement amount –30-Day Warning Report 35

Direct Loan Training Suite – Programmatic Primer Borrower’s Right to Cancel School must honor request –Affirmative confirmation: within 14 days –No affirmation: within 30 days School option after those deadlines provided it is within 120 days of disbursement date After 120 days, or schools denial –Borrower repays & is responsible for any fees/interest To cancel a loan in COD, reduce loan amount and disbursement amounts to $0. 36

Direct Loan Training Suite – Programmatic Primer Returning Funds on Borrower’s Behalf When returning funds on behalf of the borrower, the school must send funds to DLSC if more than 120 days have passed since the date of disbursement Send as payment on loan Include borrower name, loan ID and loan amount being returned on school’s check to COD U.S. Department of Education Attention: Payment Center P.O. Box Atlanta, GA

Direct Loan Training Suite – Programmatic Primer Funds Current Funding Level (CFL) Drawdowns Excess Cash 38

Direct Loan Training Suite – Programmatic Primer Funding Schools receive initial Current Funding Level (CFL) Funding Method – Advance Cash May request funds from G5 before/after disbursing aid School submits Actual Disbursement Records to COD to substantiate drawdown within 30 days 39

Direct Loan Training Suite – Programmatic Primer Schools use the G5 System to: –View current funding information –Return cash –Request payments and adjust drawdowns 40

Direct Loan Training Suite – Programmatic Primer G5 Schools should contact G5 when: –They need to add a new bank acct. –They need to designate which acct. they will use Contacting G

Direct Loan Training Suite – Programmatic Primer Funding Schools request funds from G5 Transmission of funds to the school –ACH (Automated Clearinghouse) –FEDWIRE 42

Direct Loan Training Suite – Programmatic Primer Funds That Must be Returned Excess Cash Overpayment of DL funds Borrower wishes to cancel all or part of loan ‒ Within 120 days of Disbursement Remember to update COD! 43

Direct Loan Training Suite – Programmatic Primer Returning DL Funds Return funds via either –G5 (preferred) or –By mail to COD School Relations Center –Include a completed Direct Loan Refunds of Cash form DLB

Direct Loan Training Suite – Programmatic Primer Returning Funds Using G5 45

Direct Loan Training Suite – Programmatic Primer Reconciliation 46

Direct Loan Training Suite – Programmatic Primer Reconciliation What is it? What do I do? Why is it important? 47

Direct Loan Training Suite – Programmatic Primer Reconciliation Schools must reconcile each month Similar to balancing a checkbook Use reports to research and determine timing differences between COD and School 48

Direct Loan Training Suite – Programmatic Primer DL Reconciliation Monthly activity –School reconciles internally, FAA and Business offices –School reconciles externally with COD Reconcile cash, loan summary, and loan detail –Document your reconciliation Aids to Reconciliation –COD screens and reports –School Account Statement (From COD) –Direct Loan Tools Software (FSA Download site) –COD Reconciliation specialists 49

Direct Loan Training Suite – Programmatic Primer Program Year Closeout 50

Direct Loan Training Suite – Programmatic Primer Program Year Closeout What is it? What do I do? Why is it important? 51

Direct Loan Training Suite – Programmatic Primer Program Year Closeout Process is complete when: School and COD show a cash balance of $0 and –All COD records match all school DL records and business office system transactions and –School Account Statement (SAS) reflects a $0 unbooked balance 52

Direct Loan Training Suite – Programmatic Primer OriginateDisburse Servicing Promissory Note Direct Loan Processing Cycle 53

Direct Loan Training Suite – Programmatic Primer Servicing Future Current Servicer: ‒ ACS Four Additional Servicers: ‒ Great Lakes Education Loan Services ‒ Nelnet ‒ Sallie Mae Corporation ‒ AES / PHEAA 54

Direct Loan Training Suite – Programmatic Primer Servicing Future July 15, 2010 –Allocations of new borrower loan volume August 31, 2010 –Additional Servicers fully operational to handle Direct Loans 55

Direct Loan Training Suite – Programmatic Primer Servicing Future Servicers comply with all legislative and regulatory requirements and unique best in business services Borrower’s loans with one Servicer Schools work with Multiple Servicers 56

Direct Loan Training Suite – Programmatic Primer Tools & Resources 57

Direct Loan Training Suite – Programmatic Primer School Web sites COD Web site – Direct Loan Web site – Federal Student Aid Information – 58

Direct Loan Training Suite – Programmatic Primer School Call Centers COD School Relations Center – Direct Loan Servicing-School Services – Direct Loan Consolidation Center –

Direct Loan Training Suite – Programmatic Primer Direct Loan School Guide Code of Federal Regulations Federal Student Aid Handbook COD Technical Reference –Implementation Guide Blue Book NSLDS Enrollment Reporting Guide School Publications 60

Direct Loan Training Suite – Programmatic Primer Borrower Web sites Federal Student Aid Information – Direct Loan Servicing Center – Borrower Services – Direct Loan Consolidation Center – Federal Student Aid Ombudsman – 61

Direct Loan Training Suite – Programmatic Primer Borrower Call Centers Federal Student Aid Information –(800) COD School Relations-Applicant Services –(800)

Direct Loan Training Suite – Programmatic Primer Borrower Call Centers (Continued) Direct Loan Servicing Center – Borrower Services –(800) Direct Loan Consolidation Center –(800) Federal Student Aid Ombudsman –(877)

Direct Loan Training Suite – Programmatic Primer Additional Assistance for Schools 64

Direct Loan Training Suite – Programmatic Primer Thank you! 65